BUSINESS REPORTER
MUSCAT, SEPT 24
The macroeconomic outlook of the Omani economy has significantly improved, successfully overcoming the challenges posed by the Covid-19 pandemic and ongoing global geopolitical tensions, according to the Central Bank of Oman (CBO).
The apex bank’s upbeat assessment of Oman’s economic outlook was outlined in its 2022 Annual Report issued here on Sunday, September 24, 2023.
“The steadfast implementation of reforms agenda under the strategic direction of Oman Vision 2040, along with favourable oil prices draw an optimistic macroeconomic outlook for Omani economy for 2023.
Economic activities in the Sultanate of Oman are already witnessing revival, with real output growing, and inflation being contained at low levels,” it stated.
According to the Central Bank, the oil prices are expected to remain at a higher-level providing support to hydrocarbon activities. The non-hydrocarbon activities are also projected to show a moderate growth in real terms in 2023 with the expected increase in demand for Omani exports.
The fiscal outlook for 2023 is projected to improve as a result of oil windfalls and fiscal consolidation measures, which have had a positive impact on both fiscal and external positions.
The expected continuation of non-hydrocarbon growth is likely to contribute to an improved fiscal outcome, potentially leading to a fiscal surplus.
This comes in line with the government’s commitment to fiscal consolidation and opens up opportunities for productive expenditures and support for economic activities.
Additionally, the external sector is expected to benefit from robust demand for Omani non-hydrocarbon exports. Overall, the outlook for 2023 indicates a sustained revival in economic activities in the country, it stressed.
“The recovery of the Omani economy has now been firmly established, as evident by its continued progress in overcoming the economic repercussions of health conditions and the global geopolitical tensions.
The nominal GDP of the Omani economy grew by 30 per cent in 2022, which was driven by improvements in both the hydrocarbon and non-hydrocarbon sectors, showing growth rates of 61.6 per cent and 16.9 per cent, respectively, the report said.
In the non-hydrocarbon sector, the recovery was broad-based with all major sectors showing positive growth during 2022. Non-petroleum industrial activities expanded by 23.5 per cent in 2022 mainly due to rebound in nominal output from manufacturing by 49.6 per cent.
The real GDP (base year 2018) of Oman grew by 4.3 per cent during 2022 as compared with a growth of 3.1 per cent in 2021.
The improvement in real GDP growth was supported by all the major sectors with output from petroleum activities showing a remarkable growth of 10.2 per cent supported by 5.9 per cent growth in natural gas output.
Among the non-petroleum industrial activities, the output from manufacturing in real terms witnessed a growth of 17 per cent, ‘mining and quarrying’ and ‘electricity and water supply’ witnessed growth of 10.5 per cent and 4.5 per cent, respectively.
In the services sector, ‘accommodation and food services’, ‘transport and storage’ and ‘’wholesale and retail trade’, showed robust growth in real output during 2022 indicating a revival in contact-based services, which were the worst affected segment by the pandemic.
Conversely, the output of construction sector, ‘agriculture, and fishing’ in real terms declined by 23.2 per cent and 9.7 per cent in 2022, respectively
The Inflation rate during 2022 remained subdued, well below global average, benefiting from the monetary policy framework, fixed exchange rate regime and fiscal policy measures. The average consumer price inflation in Oman was 2.8 per cent in 2022 compared to 1.6 per cent in 2021.
Given the country’s dependence on imports for meeting a large part of day-to-day requirements, the global inflation conditions had a dominant impact on prices in the Sultanate of Oman.
The impact of global inflationary pressures on domestic inflation was, however, to some extent contained by appreciation in the nominal effective exchange rate (NEER) of the Omani Rial, which appreciated (y-o-y) by 6.3 per cent in December 2022 amidst strengthening of USD, and government interventions that had largely insulated the domestic inflation from global inflation spikes.
Oman’s public finance achieved remarkable positive fiscal performance in 2022, surpassing previous years, driven by higher oil and reform measures undertaken by the government.
Crude oil prices in 2022, surpassing the levels observed in the previous year. The average Oman oil price in 2022 was $95.4 per barrel, higher by 48.4 per cent than that in a year ago, while oil production during the year increased by 9.6 per cent compared to 1.9 per cent in 2021. These developments have generated fiscal space for the government to undertake productive expenditure while remaining on the course of fiscal consolidation spelt out under the Medium-Term Fiscal Plan (MTFP).
Government revenue during 2022 witnessed a notable increase of 29.3 per cent compared to the previous year. This was primarily driven by higher oil and gas revenue as well as other current revenues.
The government expenditure also increased by 7.3 per cent in 2022 from the level seen in the previous year. The surge in oil revenues provided a cushion for the economy, leading to the Sultanate of Oman reporting its first surplus since 2014.
The government has successfully restored fiscal sustainability by enhancing non-oil revenue, increasing spending efficiency, and controlling the budget deficit. This resulted in a fiscal surplus of 2.6 per cent in 2022 from a deficit of 3.6 per cent in 2021. These effective measures enabled the government to successfully decrease the public debt to GDP ratio to 40.2 per cent in 2022 from 61.7 in 2021.
As a result of the continued efforts in debt reduction and improved fiscal outcome, Oman experienced positive and stable improvements in its credit ratings outlook during 2022, as recognised by credit rating agencies, the report added.
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